What is a Sheriff’s Sale? What You Need to Know in Pennsylvania
A sheriff’s sale can occur when a homeowner is unable to make good on their mortgage payments. It may seem like just another type of repossession sale, but there are a few factors that can cause some surprising turns. Understanding the ins-and-outs of how this type of sale works will ensure you make an educated, and hopefully lucrative, sale or purchase.
What is a Sheriff’s Sale?
When local law enforcement holds an auction of repossessed properties, it is called a sheriff’s sale. They can also sell properties to satisfy liens on the property from nonpayment of taxes. The money accrued from the sale is given to banks, mortgage lenders, tax collectors, and any entity that lost funds on the property.
When Does a Sheriff’s Sale Happen?
No properties can be auctioned at a sheriff’s sale until the foreclosure process has reached the end and the homeowners are no longer able to make mortgage payments. The mortgage lender is then able to submit the property to a sheriff’s sale for public auction to recoup all unpaid debt.
Most people are familiar with foreclosure sheriff’s sales, but unpaid utilities and property taxes can also result in a sheriff’s sale.
This process does not happen overnight. Several notices will arrive as more payments are missed. Lenders are required to send the Act 91 Notice at least 30 days before filing for foreclosure. It informs delinquent homeowners of their rights and responsibilities as well as routes for possible avoidance of foreclosure.
Where are Sheriff’s Sales Held?
Sheriff’s sales are most often conducted at a county level. They are usually held in the sheriff’s office, a community building, or courthouse. Larger sales are outdoors, commonly on the steps or front lawn of the county courthouse. The location of a sheriff’s sale is publicized for 30 days before the sale.
What Can be Auctioned at a Sheriff’s Sale?
Everything sold at a sheriff’s auction has been foreclosed upon. There are several types of properties that could be available including:
- Single-family homes – one to three-bedroom homes.
- Multi-family homes – duplexes, triplexes, and townhomes
- Apartments – one or more buildings containing several home units.
- Mixed-use homes – buildings with a home unit and a commercial or industrial space.
- Retail establishments – buildings zoned for business ventures.
- Industrial – buildings intended to house factory or assembly work.
- Vacation homes – homes generally used or rented seasonally.
- Bare land plots – plots of land without structures built on them.
Why Do People Go to Sheriff’s Sales?
Since the properties at a sheriff’s sale are all foreclosed or have liens against them, they tend to sell for much less than they are valued. Investors go to these sales to find lucrative investment deals. Other buyers are simply looking for a new home at a good deal.
These sales don’t always have a lot of bidders, however, because the properties are sold “as-is”, which often means full of furniture and belongings and in a state of disrepair.
How Does a Sheriff’s Sale Work?
Once a borrower is unable to catch up on their mortgage payments, the property can go to auction at a sheriff’s sale. The auction is announced in newspapers and online forums. They are open to all members of the public, including lenders intending to buy back their own properties.
Properties are auctioned off to the highest bidder who must make a down payment and agree to the terms to pay the rest of the money due on the property.
What Happens After a Sheriff’s Sale?
The sheriff’s office is required to report a schedule of distribution within 30 days of the date of sale. The following 10 days are reserved to hear any objections. A sheriff’s sale can be challenged on grounds of lack of authority and fraud.
Homeowners who lose their homes due to unpaid taxes have the right of redemption in Pennsylvania. They may regain ownership of their property if they pay all taxes in full, repay the winning bidder, and reimburse all costs spent on repairs within nine months.
This right is surrendered if the property was vacated less than 90 days from the sale date and it can only be used on delinquent tax sales and not foreclosures from mortgage nonpayment.
Homeowners can also challenge the sale before the deed is transferred to the new owner by filing a motion to set aside the sale. The deed is generally transferred within 21 days. At that point, the new owners can ask for a court order to remove anyone still residing in the property.
Can You Stop a Sheriff’s Sale?
In Pennsylvania, there are three ways to possibly stop a sheriff’s sale:
- Tax Sale Redemption
- Short Sale
If the property was used as a residence in the last 90 days before the sale, homeowners can pay all due taxes to receive their home back in a tax redemption sale. They must do so within 90 days of the sale. They must also pay all taxes, interest, and expenses.
Since homes rarely sell for more than a small percentage of their actual value at a sheriff’s sale, lenders will sometimes be willing to consider a short sale if the buyers can negotiate a profitable deal. Lenders can unlist the house from the auction at any time and accept another offer.
Filing bankruptcy effectively stops all court collections actions, including a sheriff’s sale. It also buys time to consider more options, instead of reacting to creditor’s demands. A Chapter 13 bankruptcy can also keep homeowners in their homes during the process.
Something to keep in mind is that the price obtained at the auction may not be enough to cover everything the homeowner owes. In that case, the lender may take out further action to recoup their expenses in the form of a deficiency judgment against the owners of the home.
The prospect of facing a sheriff’s sale is a scary thing. Unfortunately, there are strict deadlines. If you are facing a sheriff’s sale, contact us as soon as possible to see how we can help before the deadlines close in.
Can a Sheriff Sale be reversed?
Probably not. In Pennsylvania, a homeowner does not have right of redemption once a home is sold at a mortgage foreclosure sale. In some very rare cases, a sheriff sale can be reversed if it was sold at a tax-debt sale.
What happens if no one bids on a Sheriff Sale?
If a home doesn’t sell at a Sheriff’s Sale, it become real-estate owned (REO) property. The home ends up in the possession of banks or other lenders until they can sell or auction off the property.
Can you get a loan for a Sheriff Sale?
Yes, in theory you can get a loan to buy a home at a Sheriff sale. Typically, you would get an FHA loan to purchase a foreclosed home, but you would need this loan to be approved at the time of the auction. If your home was foreclosed upon, it will be difficult to impossible to get a loan to try to win it back at the auction.
Can anyone attend a Sheriff Sale?
Yes, Sheriff Sales are open to the public. They typically take place in county courthouses.
Who gets the money from a Sheriff Sale?
The proceeds from properties sold at Sheriff Sales go toward the mortgage lenders, tax collectors, or banks that were not paid by the previous owner. This is the solution to repay those lenders whose borrowers fell into default.
How much do foreclosed homes sell for at auction?
The amount that a house sells for at a Sheriff Sale depends on various factors, including the appraised value, market conditions, and availability of interested buyers or investors. More often than not, foreclosed homes sell well below the appraised value at foreclosure auctions, making it a good opportunity to find a cheap investment property.
If your home has been foreclosed upon and is headed to a Sheriff Sale, there is still a chance for you to get it back under redemption rights. Repossessing your home after foreclosure is difficult, however, so contact our attorneys at Cibik Law, P.C. to learn more about the laws around foreclosure and your options. Come in for a free consultation to discuss your debt, finances, and opportunities to keep your home.